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Macrovision Holds Off High-Def Development

8 Mar, 2005 By: Erik Gruenwedel

Macrovision doesn't plan to introduce copy protection software for next-generation high-definition discs until the market decides between rival HD-DVD and Blu-ray Disc formats.

On an investor call, Macrovision president and CEO Bill Krepick said the Santa Clara, Calif.-based digital rights management software firm is in discussions with its customers about high definition, but cautioned against developing anti-piracy software against an unknown culprit.

“Irrespective of which format is successful, whatever the encryption system exists will most likely be cracked like CSS and you will need some type of anti-ripper technology,” Krepick said. “It will take a while [to develop].”

Strong volume DVD sales—including previously viewed material—during the holidays helped Macrovision post fourth quarter (ended Dec. 31, 2004) earnings of $15.8 million, or 31 cents per diluted share, compared to $7.9 million, or 16 cents per share during the same period the previous year.

Revenue for Macrovision was $59.5 million compared to $39.8 million the prior year.

DVD copy-protection software accounted for 61 percent of the company's $182 million 2004 revenue.

In the quarter Macrovision negotiated multi-year contracts with Universal Studios Home Entertainment and HBO Home Video for full copy protection of their DVD and VHS products.

That said, Krepick admitted two significant DVD holiday releases were not protected by Macrovision technology.

In addition, increased threats from ripper software and file sharing have resulted in some studios opting away from Macrovision's conventional analog protection software, which impacted negatively on average royalties.

“We have been under pretty significant pressure in that space,” Krepick said.

He said the company is supporting in-house trials with a number of studio customers regarding recently introduced RipGuard [anti-ripping DVD] and Hawkeye [anti-file sharing] services.

Although one unidentified studio of a major DVD release in Europe employed RipGuard, Krepick said many studios have wait-and-see attitudes about adoption and would like to see what the competition does; others want more testing of the product.

“We are taking a conservative view of our [copy-protection software opportunities] in 2005,” Krepick said. “We believe RipGuard and Hawkeye will gain traction slowly in the first half of the year.”

Macrovision also believes transaction-based royalties tied to video on demand purchases will grow this year as a small percentage of its pay-per-view revenue.

“VOD purchases in the U.S. are running around one-third of a buy per subscriber per month,” Krepick said. “Not all studios will require copy protection for all their VOD content and cable companies will likely trial copy-protection services before going to full deployment.”

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